Home buyers

EmilyChurch

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NEW YORK (CBS.MW) -- More minorities and singles bought homes last year than ever before, helping to drive the housing market to one of its best performances in 30 years, a survey of major American housing markets released Thursday shows.

Does that mean it's getting easier for lower-income groups to buy homes? Well, yes, and maybe not, say market experts. Lower interest rates, social mores and marketing all played a hand in re-shaping the housing market last year, and all those elements are subject to change.

All the ducks were in a row to push the housing market to new records last year: consumer confidence jumped 20 points, and incomes rose faster than inflation. In addition, the economy was nearing full employment and mortgage rates remained low. If interest rates rise, "fewer singles and minorities will be able to qualify for mortgages, and so their share could go down."

John Pfister, Chicago Title "Everything that could possibly come together at one point did," said John Pfister, vice president of Chicago Title and Trust Co., the title company that has conducted the "Who?s buying homes in America" for the past two years.

"I had to go back to 1968 to find a year where all of those factors were similar," he added.

Bigger share

Economists say the rapid growth in home buying by minorities augurs well for minority home buying in the future. Married and white buyers still bought most of the homes on the market last year, but minorities bought 27.7 percent more homes last year than in 1996.

In addition, minorities represented 28.4 percent of first-time home buyers, up from 24.8 in 1996, and 17.8 percent of repeat buyers, compared with 13.3 percent in 1996.

"Nobody can tell if 1998 will be as good a year, but we would expect that inflation will rise above the 1.7 percent level of 1997, and if that does interest rates will go up a little bit and fewer singles and minorities will be able to qualify for mortgages, and so their share could go down," said Pfister.

However, what is unknown is the degree to which aggressive marketing by banks to minorities led to the double-digit growth in minority home buying. "It certainly contributed," Pfister said.

Married buyers

The number of married couples buying homes declined in 1997, from a 70.2 percent share of the overall market to a 64.7 percent share.

"I think we?re seeing those rates drop because married couples saw the low rates and decided to refinance their mortgages, rather than buy," he said. He expects the number of married home buyers to swell over the next few years as aging baby boomers decide to move into smaller homes.

Yet, the decline in married home buying last year appears to be part of a wider phenomena.

"There is a long-term trend going on in the economy for some years that the number of unmarried couples living together has been rising, which is why the Census Bureau doesn?t even really use the family as a major analytical tool anymore, but are looking at households," said Bruce Bartlett, senior fellow at the National Center of Policy Analysis, a public policy research institute based in Dallas.

Bartlett testified before the House Ways and Means Committee on Wednesday that some 40 percent of working married couples in America are taking unfair hits from the so-called marriage tax penalty, which affects couples when both earn salaries near the same level and, as a result, end up paying more income tax than people who are single.

Hot markets

Another potential fly in the ointment are signs of overheating in some areas of the country. San Francisco was the costliest market for the second year in a row, according to the survey with highest average home price of $326,000 last year.

"It is a concern when prices continue at a rate of increase that is faster then incomes for a certain period of time," Pfister said. Yet the imbalance doesn?t last for long. "It?s like a rubberband, you can stretch it and stretch it and then it finally snaps.

That is happening in Portland, Ore. Home prices were soaring, and wages were not keeping track, but home prices are finally starting to come down, he said.

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